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									current economic trends
                                                                                                                                                                                                         Slovenian Economic Mirror, April 2010              7
                                                                                                                                                                                                                       Current Economic Trends

International environment                                                                                                                                                                     sustainability of public finance have increased since the
                                                                                                                                                                                              autumn, particularly for certain developed countries.
The spring forecasts of the European Commission and                                                                                                                                           The latter is particularly important, according to the IMF,
IMF confirm the expectations that the global economy is                                                                                                                                       as governments will have limited room for manoeuvre
gradually recovering, though unevenly across regions and                                                                                                                                      should economic activity drop again as in the autumn
more slowly than after previous recessions. Both institutions                                                                                                                                 2008.
revised their autumn forecasts upwards slightly, largely
due to the recovery in developing economies, which has                                                                                                                                        The recovery of the European economy is positively
been more dynamic than projected in the autumn. The                                                                                                                                           influenced by the recovery of global trade flows, while
rebound has also been positively impacted by rapidly                                                                                                                                          domestic demand remains weak. According to the EC and
recovering world trade flows, better-than-expected                                                                                                                                            IMF forecasts, this year’s economic growth in the EU and
conditions in financial markets (though still worse than                                                                                                                                      euro area will thus be modest this year, at 1.0%. Along with
before the crisis), and particularly by the movement of                                                                                                                                       massive fiscal stimulus, the recovery in the EU will mainly
inventories. After declining by 0.6% last year, the world                                                                                                                                     reflect improvement in the international environment
economy will increase by 4.2% this year and 4.3% next                                                                                                                                         and consequently higher demand for European goods.
year, according to IMF projections. Both institutions                                                                                                                                         According to the EU, this will have a positive impact
find risks to be more balanced than in the autumn, but                                                                                                                                        particularly on countries with large shares of investment
uncertainty regarding short-term prospects remains high,                                                                                                                                      goods in total exports, which dropped most notably
particularly because the recovery is still mainly dependent                                                                                                                                   during the crisis and are now recovering at the fastest
on fiscal and monetary stimulus. The sovereign debt risk                                                                                                                                      pace, while euro area exports have also been favourably
and the risk of a loss of the ability to ensure the long-term                                                                                                                                 impacted by the depreciation of the euro in recent
                                                                                                                                                                                              months. Domestic demand, however, remains weak,
                                                                                                                                                                                              as private consumption stagnated in the last quarter of
Figure 1: Structure of world economic growth                                                                                                                                                  last year and investment continued to decline. Overall,
                                                           Rest of the world                   China             USA               Other developed countries                                  GDP in the EU and euro area ceased to grow towards
                                                           5.5                                                                                                                                the end of 2009, which the EC associates with the expiry
                                                                                                                                                                                              of certain short-term incentives, while the short-term
Contribution to Global GDP Growth, PPP Basis, three-year

                                                           4.5                                                                                                                                movement of GDP was also significantly influenced by
                                                                                                                                                                                              the cycle of inventory adjustment. GDP growth is also
                                                                                                                                                                                              set to be modest in the first three quarters of this year,
                                                           3.5                                                                                                                                and the recovery is not expected to become sustainable
                  moving averages, %

                                                                                                                                                                                              before the end of this year and in 2011. According to
                                                           2.5                                                                                                                                the EC, the speed and sustainability of the economic
                                                                                                                                                                                              recovery will crucially depend on the resolution of global
                                                                                                                                                                                              imbalances. If Asian economies were to maintain the
                                                                                                                                                                                              current structure of economic growth and their current
                                                                                                                                                                                              exchange rate policies, the burden of adjustment would
                                                           0.5                                                                                                                                fall mainly on the European economy, which would lead
                                                                                                                                                                                              to the appreciation of its real effective exchange rate
                                                                                                                                                                                              and a consequent loss in competitiveness. The recovery
                                                                                                                                                                                              of the European financial system is another important
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